VZCZCXYZ0011
RR RUEHWEB

DE RUEHBU #0619/01 0892039
ZNR UUUUU ZZH
R 302039Z MAR 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 7703
INFO RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFIUU/US CUSTOMS AND BORDER PROTECTION WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 6067
RUEHCV/AMEMBASSY CARACAS 1156
RUEHMN/AMEMBASSY MONTEVIDEO 6323
RUEHSG/AMEMBASSY SANTIAGO 0311
RUEHBR/AMEMBASSY BRASILIA 5928
RUEHLP/AMEMBASSY LA PAZ MAR VILNIUS 0008
RUEHSO/AMCONSUL SAO PAULO 3222
RUEHRI/AMCONSUL RIO DE JANEIRO 2182

UNCLAS BUENOS AIRES 000619 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
TREASURY FOR LTRAN AND MMALLOY 
TREASURY PASS IRS 
DOE/NNSA FOR STEPHANIE CLARKE 
WHA FOR WHA/BSC, WHA/AND AND WHA/EPSC 
E FOR THOMAS PIERCE 
EB/CBA FOR FMERMOUD, DENNIS WINSTEAD 
EB/IFD/OIA FOR WSCHOLZ, MTRACTON 
EB/IFD/OMA FOR AHAVILAND AND ASIROTIC 
PASS NSC FOR JOSE CARDENAS 
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE 
PASS USTR FOR EEISSENSTAT, SCRONIN 
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER 
US SOUTHCOM FOR POLAD 
 
E.O. 12958: N/A 
TAGS: ECON EFIN KTFN AR
SUBJECT: CAPABLE ARGENTINE TAX AUTHORITY COOPERATING ON CSI, TRADE 
TRANSPARENCY, SEEKS COOPERATION WITH DOE AND IRS. 
 
¶1.  This is an Action Request for the Departments of Energy (Paras. 
2, 8) and Treasury (Paras. 4, 17). 
 
------- 
Summary 
------- 
 
¶2. (SBU) The Argentine revenue authority (AFIP) seeks to expand 
cooperation with the U.S. on a range of important areas, according 
to its Director Alberto Abad.  Argentina is a Latin American leader 
in Container Security Initiative (CSI) implementation.  Abad said 
AFIP seeks to expand its CSI pilot effort into a state-of-the-art 
multi-port program linked to a Megaport (WMD detection) surveillance 
program and wants to engage the U.S. Department of Energy to move 
forward on this.  Post requests DoE support to facilitate GoA 
engagement on U.S. Megaport priorities. 
 
¶3. (SBU) AFIP also wants to expand cooperation with the Embassy's 
Immigration and Customs Enforcement office on money laundering 
investigations related to tax evasion, contraband and smuggling 
through their joint Trade Transparency Unit.  AFIP is separately 
working to control trademark piracy through a resolution allowing 
Customs to detain shipments that appear to violate trademarks 
registered in Argentina and the formation of a voluntary trademark 
registry, as well as participating in a public/private sector 
initiative to provide GoA enforcement agencies intelligence on 
counterfeit shipments.  Abad said AFIP wants to augment cooperation 
with the Embassy and the USG in this field. 
 
¶4. (SBU) AFIP has built a strong track record boosting GoA revenue 
collection, partially due to Argentina's dramatic economic 
expansion, but also to AFIP's efforts to develop a culture of 
taxpayer compliance and to reduce evasion.  One important way AFIP 
is enhancing its anti-evasion efforts has been through the 
negotiation of cooperation and information exchange agreements with 
other national tax authorities, including those of Brazil, China, 
and Italy.  AFIP Director Abad also asked Ambassador that the 
Embassy help facilitate negotiation of a cooperation and Information 
Exchange Agreement between AFIP and the U.S. IRS.  Post requests 
U.S. Treasury support in facilitating direct contact between AFIP 
senior management and appropriate IRS officials.  END SUMMARY 
 
-------------------------------------------- 
Container Security and Megaports Initiatives 
-------------------------------------------- 
 
¶5. (U) Ambassador, EconCouns, and ICE Attache met March 23 with 
Alberto Abad, GoA Director of Public Revenue (Administracion General 
de Ingresos Publicos -AFIP) and Customs Director Dr. Ricardo 
Echegaray, who reports to Abad.  Abad explained that AFIP, now 11 
years old, combines the previously independent 5,000 employee 
Customs Administration (Administration Nacional de Aduanas - ANA) 
with the 17,000 employee Tax Authority (Direction General Impositiva 
- DGI), and the GoA's social security administration.  The GoA 
modeled this tri-partite organization on equivalent organizations in 
Spain and Brazil. 
 
¶6. (SBU) Abad noted the GoA's ongoing commitment to port security in 
general and the USG's Container Security Initiative (CSI) in 
particular.  He called Argentina a Latin American leader in CSI 
implementation, noting that the Argentine Customs authority had 
 
 
 
 
 
recently purchased 9 mobile scanners (five of which are already in 
use) and would shortly open bidding for 3 fixed scanners. 
 
¶7. (SBU) Customs Director Echegaray envisions expanding the CSI 
program from Buenos Aires' "Dock Sud" (South Dock) to additional 
ports with the goal of eventually pre-clearing all U.S. bound cargo 
containers from all Argentine port facilities.  He noted, for 
example, that Zarate port on the Parana River in Buenos Aires 
province alone handles 11% of Argentine exports to the U.S. 
Echegaray asked that the U.S. CSI team consider facilitating 
inspections of regional ports from a base in Buenos Aires via remote 
inspection scanners.  Dr. Echegaray called this vision modeled on 
the CSI program currently in place in Italy, where remote ports 
provide inspection and scanning capabilities to centrally based CSI 
teams. 
 
¶8. (SBU) ACTION REQUEST:  Finally, Abad noted that Echegaray's 
Customs agency is taking the lead in implementing the Megaport 
initiative (after a long bureaucratic battle inside the GoA), which 
guards against WMD shipment in container cargo.  AFIP, he said, is 
purchasing additional equipment that will allow the nine already 
purchased mobile scanners to also be capable of screening for 
radioactive traces.  He said AFIP wants to take up the offer of 
cooperation with the U.S. Dept of Energy.  Ambassador welcomed that 
the GoA had sorted through which GoA agency will be in charge of the 
Megaport initiative and said we would query Washington about next 
steps.  Note: Post has subsequently advised DOE/NNSA's Stephanie 
Clarke of the GoA's apparent readiness to move forward on this 
issue.  Post requests DoE support to facilitate GoA engagement on 
U.S. Megaport priorities. 
 
--------------------------------------------- --------- 
Trade Transparency Unit, Anti-Money Laundering Efforts 
--------------------------------------------- --------- 
 
¶9. (SBU) Abad noted U.S.-Argentine anti-money laundering efforts 
include cooperation through a number of channels, including through 
the GoA's Financial Intelligence Unit (UIF).  He said the Embassy's 
ICE office coordinates with GoA Customs through the Trade 
Transparency Unit (TTU) to combat trade-based money laundering 
linked to bill of lading manipulation.  Through the TTU, Abad said, 
AFIP hopes to expand cooperation with ICE on money laundering 
investigations related to tax evasion and contraband/smuggling. 
 
¶10. (SBU) Ambassador noted that the U.S. Treasury was organizing the 
upcoming conference in Bogota on the development and implementation 
of effective anti-money laundering and counter-terrorist financing 
(AML/CFT) controls in the banking sector (U.S.-Latin America Private 
Sector Dialogue).  He said the Embassy had passed conference 
invitations to Argentina's Central Bank, Ministry of Economy, UIF, 
National AML/CTF Coordinator, and Banking Associations, and agreed 
to provide details to AFIP.  Abad noted the GoA's own AML 
enforcement efforts, in coordination with FATF and GAFISUD (the FATF 
style regional body for South America), and called the GoA's recent 
reorganization and strengthening of the UIF a proactive effort to 
address these serious threats.  Of all foreign governments, 
Argentina is working most closely with the U.S. on these issues, he 
said, adding that the GoA in general and AFIP in particular wants to 
deepen its institutional relationship with the U.S. Embassy. 
 
--------------------- 
 
 
 
 
 
Trademark Enforcement 
--------------------- 
 
¶11. (SBU) Ambassador called IPR protection a top Mission priority 
and congratulated Abad on AFIP's recent destruction of several 
hundred thousand pirated CD's and cassettes.  Abad noted that in 
October 2006, AFIP issued a resolution allowing Customs to detain 
shipments which appear to violate trademarks registered in 
Argentina.  Customs can hold merchandise long enough to contact 
rights-holders, confirm authenticity, and release legitimate goods 
or initiate seizure proceedings for counterfeit.  Additionally, AFIP 
announced February 22 the formation of a voluntary trademark 
registry, which will assist Customs in implementing this resolution. 
 Abad called trademark piracy the crime of the 21st century.  "Many 
are talking about trademark protection, but we are acting and have 
been doing so for the past five years," Abad said.  This effort will 
only increase with this new AFIP resolution and the formation of a 
trademark registry, he added. 
 
¶12. (SBU) Abad explained that AFIP's anti-piracy efforts complement 
those of the Ministry of Economy's Secretary of Industry and 
quasi-independent National Institute for Intellectual Property 
(INPI) who together take the broader lead on this patent, copyright 
and trademark protection.  Etchegaray noted AFIP's participation in 
the Committee to Fight Piracy, a joint public/private sector 
initiative in which the private sector provides intelligence on 
counterfeit shipments to GoA enforcement agencies.  Based on this 
intelligence, Aduanas has already confiscated over 70 tons of CDs, 
sunglasses, watches and other counterfeit items.  ICE Attache noted 
that they are currently engaged in several joint investigations with 
the GoA targeting U.S. companies/individuals moving counterfeit or 
patent infringing goods into Argentina.  Ambassador said the Embassy 
was moving to increase our work on IPR protection and would like to 
develop close cooperation with AFIP.  Abad agreed.  (Note: We will 
incorporate this cooperation with AFIP into Embassy's IPR action 
plan, currently under preparation.  End Note) 
 
----------------------------------------- 
AFIP's Success in Boosting Tax Collection 
----------------------------------------- 
 
¶13. (SBU) In 1997, the IDB approved a $96 million loan (plus $96 
million in GoA counterpart funds) to assist in AFIP's consolidation 
and modernization process.  The IDB-funded program included five 
major components:  legislation and regulation; administration; 
information technology; organizational development; and auditing. 
Both the GoA and IDB consider the AFIP modernization program quite 
successful, with significant declines in tax collection arrears and 
evasion, and better attention to large and smaller taxpayers. 
 
¶14. (SBU) Ambassador noted that the IDB considers AFIP a model tax 
authority, praised AFIP's strong track record in boosting government 
 
revenue collection, and asked how much of this increase was due to 
growth-led increases in VAT and income taxes and how much due to 
improved technology, taxpayer education, and enforcement efforts. 
Abad called 70% of the GoA's revenue growth due to economic 
expansion (including dramatically increased employment), the capture 
of larger share of the inflation-boosted income in non-indexed 
income taxes, and the imposition of new taxes (including export 
taxes and a financial transactions tax)  However, he attributed 
fully 30% of increased revenues to AFIP's enhanced collection 
 
 
 
 
 
efforts.  Corporate tax collections should increase substantially in 
the 2007-8 periods, he added, as tax loss carry forwards of over ARP 
120 billion (US$ 40 billion) in company losses incurred in the 
aftermath of the 2001/2 economic meltdown expire. 
 
¶15. (SBU) AFIP's efforts to develop a culture of taxpayer compliance 
and to reduce evasion will continue, Abad said, in part due to a 
significant increase in GoA budget resources allocated to the agency 
and improved information systems at its disposal.  There is 
significant room for improvement in collections, he concluded, with 
Argentina's effective tax rate a relatively low 24%, well below 
Brazil's 37%, the European Union's 40%, and the U.S.' 32%.  (Note: 
Most U.S. investors in Argentina, particularly in extractive 
industries, argue that their consolidated tax burden is 
significantly higher than 24%. End Note). 
 
¶16. (SBU) One important way AFIP is enhancing its anti-evasion 
efforts has been through the negotiation of cooperation and 
information exchange agreements with a number of other national tax 
authorities, including those of Brazil, China (in 2006), and Italy 
(recently in 2007).  Abad asked that the Embassy to help facilitate 
negotiation of a cooperation and Information Exchange Agreement 
between AFIP and the U.S. IRS.  Argentina does have some contact 
with the U.S. IRS now though Argentina's membership in the 
Inter-American Center for Tax Administration (Centro Inter-Americano 
de Administracion Tributario, which includes Latin nations and 
Canada, Spain, Italy, France, Luxembourg and South Africa as 
members).  But AFIP sees the U.S. IRS as a model to be emulated and 
seeks a closer working relationship through a bilateral accord.  The 
Ambassador promised to follow up and facilitate direct contact 
between the two organizations. 
 
¶17. (SBU) ACTION REQUEST:  AFIP and its Customs affiliate are 
impressively professional GoA entities already cooperating closely 
with the USG on substantive CSI and anti-money laundering 
initiatives.  AFIP has expressed interest in adding the Megaport 
initiative to this list, and anti-trademark piracy efforts are an 
additional area where Post wants to work closely with AFIP. 
Supporting AFIP's efforts to reduce rampant tax evasion in Argentina 
speaks to our mission's goal of helping ensure this nation's 
sustainable economic recovery from the 2002 economic crisis.  Post 
requests U.S. Treasury support in facilitating AFIP's request for 
direct contact between AFIP senior management and appropriate IRS 
officials to discuss the potential to negotiate a bilateral 
cooperation and information exchange agreement. 
 
WAYNE